How should British manufacturers deal with Trump tariff uncertainty?

Shifting faster than the desert sands, Donald Trump's various tariff announcements over the last few months are presenting significant headaches for UK manufacturers.

The UK’s trade deal with the US, now in force, [from Monday 30 June)] includes a reduction in tariffs from 27.5 per cent to 10 per cent for car manufacturers, but a 10 per cent tariff on general imports, along with a 25 per cent tariff on UK steel.

And according to a survey from manufacturers' industry association Make UK and professional services network BDO, this is hitting exports.

Six in ten manufacturers expect their export volumes to the US to be hit, while 63 per cent expect their business to be negatively impacted by tariffs.

The US, indeed, has slipped to fourth place as a prospective growth market for UK manufacturers - the first time it hasn't been the second most favoured destination for export growth, behind the EU. Instead, manufacturers are now looking to Asia/Oceania and the Middle East.

"While at first glance the headline numbers may not look too bad, manufacturers are facing a gathering storm of huge uncertainty in one of their major markets," says Seamus Nevin, chief economist at Make UK.

And there's a similar warning from S&P Global, whose Global UK Manufacturing Purchasing Managers’ Index found that rising economic and trade uncertainties, including the US tariffs, was draining confidence from both consumer and business-to-business clients.

"New export business fell at the quickest pace for nearly five years, with demand from clients in the US, Europe and mainland China all declining," says Rob Dobson, director at S&P Global Market Intelligence.

"Surveyed manufacturers noted that US tariff announcements were having a noticeable impact on global markets as trading partners adapt to increased trade volatility."

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According to the Bank of England, the manufacturing industry is particularly reliant on US markets. While, generally, 3.4 per cent of UK firms’ total sales come from exports to the US, that figure is 6.8 per cent for manufacturing firms.

So how are UK manufacturers adapting?

Lee Collinson, managing director and national head of manufacturing, transport and logistics at Barclays, says that a poll of clients found that just under half planned to carry on as normal, while 41 per cent said they were taking a pause to see how things turn out; around 5 per cent said they were rethinking their export strategy.

More than eight in ten said they are planning to adjust their overseas trade strategy in response to US tariffs.

"My sense is that there’s an increased emphasis on risk management at many manufacturing businesses as a result of the tariffs, with a new focus on contingency planning, making sure the right funding facilities are in place and scrutinising cost bases," says Collinson.

"We’re also seeing greater interest in FX hedging policies as a result of the currency volatility induced by the wave of tariff announcements."

Manufacturers are also, he says, looking to minimise supply chain disruption from the tariffs, mainly by sourcing materials or products from countries outside the US.

MHA - the UK member of global accountancy network Baker Tilly International - advises manufacturers to first carry out a detailed review of their supply chain. With tariffs calculated based on the origin of goods, rather than their point of export, manufacturers must have absolute clarity on where each component of their product originates.

This matters particularly where products are assembled from parts sourced globally, where the final country of assembly may not be the country of origin under US customs rules. Sourcing strategies may need to change as a result.

And for businesses selling to the US, it's important to forge strong relationships, focusing not just on pricing, but also on working together to minimise the impact of the tariffs.

"This might include reviewing transaction structures, shipping routes, or documentation, with the goal of managing risk and protecting profitability on both sides," says the firm's Chris Barlow.

And if all else fails and it's not possible to mitigate tariffs, manufacturers should attempt to improve operational efficiency, reducing wastage and accelerating investment in automation and smart technologies.

"Artificial intelligence, in particular, offers new possibilities across the manufacturing cycle from predictive maintenance and real-time supply chain monitoring to enhanced demand forecasting," he says.

"Not only can this help reduce costs, but it also supports greater agility at a time when responsiveness to change is a competitive advantage."

Make UK is calling on the Government to convene a Tariffs Taskforce, bringing together British industry along with relevant government departments to help companies navigate their way through the tariff complexities and uncertainty.             

But, says Collinson, there's plenty of hope for the future.

"Whatever the tariffs’ impact, I’m confident the adaptability of our manufacturing sector will help it navigate future potential trade challenges, and change often brings opportunity," he says. "US tariffs could mean that the UK depends less on the US market, and focuses more on its already significant trade with Europe."

Need help navigating the tariff turbulence?

At Howden, our manufacturing insurance specialists understand the complex challenges British manufacturers face in today’s volatile trade environment. Whether you're reassessing your supply chain, exploring new markets, or looking to protect your margins, we’re here to help you build resilience and stay competitive.